By : Clifford R. Wood, Jr., Delaware Journal of Corporate Law Volume 47 Web Editor & Evan Brown, Delaware Journal of Corporate Law Volume 48 Web Editor
On April 25, 2022, the Delaware Journal of Corporate Law of Widener University Delaware Law School presented the 36th Annual Francis G. Pileggi Distinguished Lecture in Law. Students, Faculty, and members of local bench and bar associations had the honor of learning from this year’s guest speaker, Professor J.S. Nelson. Nelson is a Visiting Associate Professor at the Harvard Business School, Associate Professor at Villanova Law School with a courtesy appointment at the Villanova Business School, and is a senior fellow at the Zicklin Center for Business Ethics Research at the University of Pennsylvania’s Wharton School.
The lecture was a two-part series with the first presentation taking place at the Hotel DuPont, du Berry Room, and the encore presentation at the Widener University Delaware Law School, Ruby R. Vale Moot Courtroom. Both lectures detailed Professor J.S. Nelson’s forthcoming book Business Ethics: What Everyone Needs to Know (co-authored by the late Professor Lynn Stout, 2001 Pileggi Lecture), and the importance of why we need to be more concerned with how organizations earn money.
Professor Nelson captivated the audience with an emotional and intellectual lecture that was stimulating and thought-provoking. Nelson also challenged us to consider difficult ethical issues, causing us to focus on shifting the narrative from a cost-benefit analysis structure in ethics policy to a value-adding analysis for organizations. Here are some comments a few of our distinguished attendees had upon reflection:
This year’s speaker gave one of the best presentations, and her topic was timeless. Having written a book on Legal Ethics myself, I know that it can be a dry subject, but she presented it in an engaging and interactive manner. I think Prof. Nelson was the first speaker in the 36 years of the Annual Lecture series who used her own recently published book as the basis for her presentation, but it makes it easier to follow-up on the topics discussed instead of waiting for the law review article that typically follows the Annual Lecture. Although, I think that Professor Stephen Bainbridge, a leading corporate law scholar who has published many books and countless articles, had his law review article finished at the time he presented the Annual Lecture about 15 years ago or so. ”
– Francis G.X. Pileggi, Esq. – Delaware Journal of Corporate Law Volume 11, Internal Managing Editor
“Milton Friedman famously wrote a half century ago that the only ‘social responsibility of business is to increase its profits.’ Prof. Nelson argues convincingly in her book that we also ‘have a moral responsibility to pay attention to how we make money.’ We all rely on these ethical precepts when we expect corporations to act honestly in the marketplace and with their stakeholders, and to not externalize costs or act in other ways that harm the rest of us.
Businesspeople face these and other ethical challenges every day, and the stakes are often high. Balancing corporate and personal self-interest against the interests of others – and even determining to whom a duty to act ethically might be owed – are not simple tasks. Prof. Nelson and Stout’s book is not an ivory tower exercise. It takes aim at the center of these ethical dilemmas in the real, day-to-day world.”
– Professor Bruce Grohsgal – Helen S. Balick Professor in Business Bankruptcy Law; Director of the Institute of Delaware Corporate and Business Law
“From law school on, attorneys are inundated with matters of ethics—classes, CLEs, hypotheticals, and real-world issues with clients—but Professor Nelson touched on core issues of ethics and how organizational structure and leadership can be so influential on outcome in a manner I had not heard before. The Pileggi Lecture is always thought-provoking and this year was no different. It left me deeply considering my role in the many organizations in which I am involved and how we are addressing or not addressing ethical issues, and what we could do differently in the future.”
– Nicolas E. Jenner, Esq. – Delaware Journal of Corporate Law Volume 43, Senior Staff
“As an alumni of the Journal, I am very pleased to see the continued success of the Pileggi Lecture. Professor Nelson’s presentation on business ethics, which focused on human nature and social responsibility, was made definitively more stimulating and challenging thanks to Professor Grohsgal’s opening commentary quoting Milton Friedman.”
– Zachary J. Schnapp, Esq. – Delaware Journal of Corporate Law Volume 44, Editor-in-Chief
“I am so glad the Pileggi Lecture returned again this year and that I was able to attend. The speaker, Professor J.S. Nelson, was captivating and spoke on an interesting and ever-prevalent topic that applies to us all. The Delaware Journal of Corporate Law did a wonderful job organizing and hosting another high quality lecture.”
– Shelby Thornton, Esq. – Delaware Journal of Corporate Law Volume 46, Editor-in-Chief
Discussion: What is the Need for Ethics
To kick-off the event, Dean Rodney A. Smolla delivered introductory remarks by thanking the Pileggi family, while providing the audience perspective into the history and significance of The Francis G. Pileggi Distinguished Lecture in Law. After brief regards, Dean Smolla introduced Professor Bruce Grohsgal, Helen S. Balick Professor in Business Bankruptcy Law and Director of the Institute of Delaware Corporate & Business Law. Professor Grohsgal gave a warm introduction to Professor J.S. Nelson, noting a few of her many notable accomplishments and highlighting her ties to Professor Lynn Stout, 2001 Pileggi Speaker (The Proper Motives of Corporate Directors).
After being welcomed, Professor Nelson laid the foundation of what her “why” is and how she has been inspired by Professor Lynn Stout. Nelson best summarized her “why” by saying, “it was really [her] co-author and mentor, the late Lynn Stout, who inspired [her] and pushed [her] to do this work.” Nelson says she aspires to pass along Stout’s message, and hopes others become part of Stout’s legacy too.
Returning to her relationship with Professor Stout, Nelson offered homage and expressed her appreciation of the mentorship Professor Stout provided. Professor Nelson, noted several books Stout authored, adding emphasis on Cultivating Conscience: How Good Laws Make Good People. Nelson proceeded to present the audience with an introduction of their book Business Ethics: What Everyone Needs to Know, looking more intently into the format and table of contents. One of their goals with this book was to ensure its accessibility and readability. Nelson stressed the book is meant to be used as a tool. The question-and-answer format allows readers the ability to pin-point a specific issue and find an answer, rather than having to read the book cover to cover. The book also has an appendix, providing readers a list of resources for additional help. A few notable chapters included: Benefits of Acting Ethical, Moral Philosophical Bases for Business Ethics, What Does Science Tell Us About Ethical Behavior, Costs of Acting Unethically, Ethical Traps, and Issues of Ethics in Leadership.
Transitioning her lecture, Professor Nelson began leading a more detailed discussion, delving deeper into the foundation and purpose behind writing Business Ethics: What Everyone Needs to Know and how the principles apply in practice. Nelson urged the audience to think about an important theme throughout her presentation, “corporations need to be concerned with how they earn their money.” In other words, posing the idea that we as humans owe it to society to ensure–or at least encourage–“business people to earn money decently.”
Nelson linked the motivations of creating wholesome ethical identities as attorneys, to the guiding principles of Ethics and Integrity of two accreditation boards we become quite familiar with in professional practice––the Association to Advance Collegiate Schools of Business (AACSB) and the American Bar Association (ABA).
Notably, in February of 2022, the American Bar Association adopted Resolution 300, which addresses the topic of ethical issues squarely. Nelson emphasized the new language of Standard 303, with part of the ABA’s responsibility now being to promote the development of students’ professional identities. Standard 303(b)(3) reads: “[a] law school shall provide substantial opportunities to students for…the development of a professional identity.” Further, 303-5 states: “[p]rofessional identity focuses on what it means to be a lawyer and the special obligations lawyers have to their clients and society. The development of professional identity should involve an intentional exploration of the values, guiding principles, and well-being practices considered foundational to successful legal practice.” Ethical conduct through professional identity is now engraved into our duty as members of the bar, and even during preparation as students. Nelson then posed a hypothetical that allowed the attendance to ponder whether there is necessarily a difference between partners of a firm and officers of a corporation when weighing the scales of ethics. Complementing the deeper question––whether ethics has any tendency to interrupt businesses’ profits. Ultimately, a safe and ethical work environment with open lines of communication tends to allow businesses to exceed past revenue trends.
By shifting the focus from a cost-benefit model when establishing ethics policies to a value-adding philosophy, corporations are better apt to address concerns in compliance while opening the door to more diverse ideas. “Data supports this [proposition],” Nelson stated. In fact, “firms that take this theory seriously find innovation, competitive advantages, better financial results, better retention…there are many metrics to quantify this.” This approach not only helps individuals understand their personal identity, but it also helps guide their moral compass and “creates opportunities for the user to fashion arguments that can be taken into the boardroom.” Consider approaching these conversations from an angle of molding shareholder value theories with business ethics. “Be a contributor to the current model and not an opposition for more buy-in,” Nelson suggested.
Corporations are taking vigilant notice of what the workforce is demanding. A heavily discussed segment of this area is diversity, equity, and inclusion (DEI). To no surprise, work-place culture and “ethics have a strong correlation with DEI”, says Nelson. For example, psychological safety in the workplace supports an ecosystem with lower retaliation rates for victims and observers who speak out about misconduct–an issue that overwhelmingly affects minorities.
“Where do we see [the need for] this,” Nelson posed, “and what are some of the flags?” Nelson answered, “it begins with awareness.” Once there is recognition of the issues, then the process moves onto drafting and implementation of mechanisms that effectively create systems of good policy that are self-regulating. One important element of this theory is to watch what people are actually doing, as hypocrisy will crumble morale and the implementation of sound policy. “People change when they are placed in power. We know this…,” says Nelson. “Many people are not even conscious of their own bad behavior,” and “humans have an incredible capability of reconciling behaviors with who they think they are,” explained Nelson. Therefore, by instituting best practices and designing the policy around preventing poor systems from developing, the organization can spend less time worrying about compliance and spend more resources on innovation, growth, and retention.
“How do we [create these systems],” Nelson asked. The answer–rethinking systems by reverse-engineering the policies, diagnosing issues early on, and then building in safeguards that function to eventually manage themselves. “We know what motivates people,” says Nelson. In fact, humans naturally have five or six core values that are standard across all walks of life that are separate from religion, culture, race, demographic, or socioeconomic correlation. “Although [these values] may manifest very differently, the principles remain the same,” Nelson explained. Tying the system back to those core values will help to remain focused on what the desired outcome of this theory is–creating a healthy ecosystem, healthy culture, and healthy structure. The goal is reframing the conversation from widgets and bottom-line figures to the impact the decision has on humans and society.
Professor Nelson succinctly synthesized her discussion into three key takeaways:
- “Modern behavioral ethics demonstrate how influenced we are by the situation and power structures in which we find ourselves.”
- “[People] tend to…have unrealistic expectations of the power of rules and other policy guidelines.”
- “[People] need to think in terms of systems that create behavior, not just liability for individuals put into places within those systems.”
By having organizations that are less influenced by power structures, “speak-up” cultures become more viable than before. Having support is crucial in this regard because “studies show numbers as high as 77% for retaliation” following the reporting or observation of misconduct, says Nelson. Upholding these guidelines, applying them standard, is also incredibly important. The millennial generation is more innate to reject hippocratic behavior than generations of the past. “Rules will be mere ‘wallpaper’ unless lived as part of the company culture and supervisors are monitoring the processes,” Nelson suggests. Therefore, it is important to establish early interventions that are small and occur often when misconduct is reported. “These interventions can be as subtle as ‘that’s not what we do here’ at the water fountain,” Nelson submits. This results in the prevention of larger issues––giving companies the ability to focus on growth and not poor cultural and/or ethical competency concerns. Nelson concluded by analogizing the development systems that create acceptable behavior to a quote by Dr. Linda K. Treviño, demonstrating “[it’s] not just bad apples…in bad barrels…but the management of the orchard.”
Speaking with Professor Nelson at the conclusion of the lectures, we expressed our gratitude to her and left her with a couple final questions to which she graciously answered. First, we were interested in knowing how we, as young lawyers entering the profession, can make an impact and immediately apply the mechanisms she discussed. Nelson noted, “make ethics yours.” This is something “everyone has within them” and it is a matter of how we foster it and what we choose to tolerate. While tension in organizations is common in this area, be value-adding by opening these conversations from a different lens. For example, suggesting a move from the cost-benefit or widgets-based approach to a shareholder value approach that incorporates contributions to society as a factor.
Finally, we wanted to know what Nelson was hoping the key take-aways the practicing members of the local bench and bar associations would be. Nelson remained consistent but expanded slightly, adding “the ultimate mission organizations should have is aspiring to implement ethical behavior standards above mere compliance. In other words, compliance is the floor of behavior.
It was an honor to host Professor J.S. Nelson for the 36th Annual Francis G. Pileggi Distinguished Lecture in Law. Nelson averred that she was encouraged by the engagement and emphasized her support to the millennials that will soon be tasked with the responsibility of addressing many of these concerns in their practices.
Dennis Tuohoy, Volume 47 External Managing Editor for the Delaware Journal of Corporate Law, spearheaded the lecture (the first live Pileggi Lecture since the Covid-19 pandemic). Tuohoy remarked,
“Professor Nelson eloquently presented a topic (ethics) that is of the utmost importance in corporate law, and that we will enter the workplace as better attorneys because of it. It was awesome being able to host the first Pileggi Lecture since the pandemic began, and I was both happy and humbled to work with so many great people in bringing back one of Delaware’s finest lectures. Thank you to everyone at Delaware Law School, the DJCL, and the Pileggi family for making the 36th annual Pileggi Lecture come to life.”
The Delaware Journal of Corporate Law endeavors forward to carry on the legacy of our predecessors, and now we stand to do so more ethically aware than before––shifting the focus from “the bottom line” to “what have we done for society recently.”
History–The Francis G. Pileggi Distinguished Lecture in Law Series
In 1985, Francis G.X. Pileggi, the then Volume 11, Internal Managing Editor for the Delaware Journal of Corporate Law, envisioned a forum whereby practitioners, judges, and academics, distinguished in the area of corporate law, could speak directly to those most responsible for setting policy on corporate law in the United States, the Delaware bench and bar. Through Pileggi’s tireless efforts and the generosity of his father, Francis G. Pileggi, a founding attorney of Pileggi & Pileggi, P.C., the idea quickly turned into reality.
In 1986, the first Pileggi speaker, Robert W. Hamilton, Benno C. Schmidt Professor of Business Law, The University of Texas at Austin School of Law, spoke to a gathering of approximately 70 people at the Rodney Square Club. Mr. Hamilton’s topic was “The State of State Corporation Law: 1986,” which was later published in 11 DEL. J. CORP. L. 3 (1986). Since that first speech in 1986, the Pileggi Lecture Series has attracted many renowned, well-respected speakers and has continued to build on the enormous success of that first lecture. The efforts of many members of the Delaware Journal of Corporate Law and the continued generosity of the Pileggi family have contributed to the Pileggi Lecture’s continued success.
“When I was an editor on the Del. J. Corp. L. many years ago and noticed that other law reviews around the country hosted annual lectures as a means, among other things, of attracting quality law review articles, I thought it was also a way to hear leading scholars, in addition to the professors at our own law school, provide insights on cutting edge topics that we might not otherwise have a chance to hear. It was also good public relations for the law school, and an opportunity for the students to network with the local Bench and Bar. So, with the funding from my father, and the support of the law school, we launched the first Annual F.G. Pileggi Distinguished Lecture in Law. I didn’t expect that almost three decades later, I would be attending the 36th Annual F.G. Pileggi Distinguished Lecture in Law. “
– Francis G.X. Pileggi, Esq. – Delaware Journal of Corporate Law Volume 11, Internal Managing Editor
After a Covid-year break in 2020, it is an honor to add Professor J.S. Nelson to the list of many prominent Pileggi Lecture speakers. Additionally, Delaware Journal of Corporate Law, along with members of the Delaware bench and bar, are immensely grateful for the continued support by the Pileggi family, ensuring the Annual Lecture is a success.